TRENDS THAT ARE SHAPING THE FUTURE OF LOGISTICS

Transcription

1 Damco eguide TRENDS THAT ARE SHAPING THE FUTURE OF LOGISTICS Moving towards a New Normal in supply chain management Han Nabben 1

2 Table of Content 01. INTRODUCTION TWELVE TRENDS THAT ARE SHAPING THE FUTURE OF LOGISTICS HOW TO PREPARE FOR THE NEW NORMAL IN LOGISTICS FURTHER READING 10 2

3 01. INTRODUCTION World exports as a percentage of global GDP showed a continuous growth trend from the mid-eighties of the last century, until Since then the growth stopped. Another indicator for trade, global capital flows between countries, achieved its highest point already seven years ago. But times are changing. Growth will still be there, if you know where to find it. According to McKinsey, approximately 600 cities are likely to realize 65% of the global GDP growth by the mid-twenties. By then, the growing cities are predicted to add up to USD 30 trillion to the world economy. Incomes in developing economies never rose faster or at a greater scale in history, and about a billion people are becoming part of consuming classes in roughly ten years time. Macro-economic changes and shifts in trade patterns have their impact on global supply chains. They provide opportunities as well as challenges. This eguides addresses the key trends that are shaping the future of logistics and provides insights on how to prepare for the new normal in logistics. The content of this eguide has been published previously on the Damco Blog. 3

4 02. TWELVE TRENDS THAT ARE SHAPING THE FUTURE OF LOGISTICS Let s have a look at some of the developments in logistics that are directly or indirectly caused by changes in trade patterns, in GDP growth or in customer behaviour. Growth patterns Growth in the logistics industry is no longer driven by exports from Asia to North America and from Asia to Europe. It will come from elsewhere, and will be more fragmented, more unpredictable and more volatile. Economic and population growth will be increasingly centred in cities. Infrastructure is becoming a major determinant for growth. Flexibility Meeting consumer s requirements at multiple locations with multiple transport modes at different times requires a flexible supply chain that can adapt easily to unexpected changes and circumstances. Globalisation International, mature and emerging markets have become a part of the overall business growth strategy for many companies. Going international has become the standard and logistic solution providers need to enable that trend. Near shoring As labour costs in Asia and transportation costs rise, increasing amounts of manufacturing are being brought closer to the end user. Multi-channel sourcing End-consumers increasingly source via multiple channels, ranging from brick & mortar shops to e-commerce. The logistics industry needs to support multi-channel strategies of their customers. Information technology The growing complexity and dynamism of supply chains requires increasingly advanced Information Technology solutions. Continuity To be able to secure speed to market and to reduce risk of delays, alternative transport modes and routes are required to support the continuing trend of outsourcing of logistics services. Sustainability Customers increasingly prefer products that are made and sourced in the right way ; minimizing business social, economic and environmental impact on society and enhancing positive effects. 4

5 Compliance Anti-bribery and corruption legislation is having an increasing impact on supply chains, since multinational companies demand that no facilitation payments are made during the export of their goods, yet still seek to source from low cost countries, which are often also at the bottom of Transparency International s global corruption index. Partnerships Manufacturers continuously search for supply chain innovations and gains through partnerships with logistic service providers. End-to-end visibility Complete visibility of the entire supply chain aspires to achieve true demand-driven planning, allowing efficient response to changes in sourcing, supply, capacity and demand. Complexity Supply chains are becoming increasingly complex and dynamic with sourcing locations being changed increasingly quickly and purchase orders becoming smaller and more frequent. These developments will have their effect on day-to-day logistics, and companies will need to prepare for the new normal in supply chain management. With all these changes, staying up-to-date on the latest trends in logistics is more important than ever. Partnerships Information technology Sustainability Near shoring Growth patterns Flexibility End-to-end visibility Globalisation Multi-channel sourcing Continuity Complexity Compliance Twelve trends are shaping the future of global logistics 5

6 03. HOW TO PREPARE FOR THE NEW NORMAL IN LOGISTICS Chapter 2 touched upon 12 trends that are shaping the future of logistics. It was argued that macro-economic changes and shifts in trade patterns have and will have significant impact on global supply chains. The conclusion was that companies need to prepare for the new normal in supply chain management. According to McKinsey, 600 cities will realize 65% of the global GDP growth by the mid-twenties But how to prepare? Well, a good start would be to do a quick-scan on how future-proof your logistics service provider currently is. The answers to below 5 questions to your logistics partner should give a good first impression. 1. What s your global spread - and notably your presence in developing countries? A global spread of logistics operations is of the essence for globally operating companies who want to be where the (future) action is. That action won t be coming from where it came from. Economic- and population growth will increasingly be centred around cities, and with about 600 cities realizing 65% of global GDP growth in a decade time, the standard trade from Asia to North America and Asia to Europe will be replaced by more fragmented, scattered and less predictable trade patterns. Simultaneously, manufacturing is being brought closer to the end-user now labour costs in Asia and transportation costs are rising. You ll want your logistics partner to continuously optimize their network, being able to adapt quickly to shifting global trade patterns. This article on Network Optimization provides more insights into how global distribution networks can be optimized. 6

7 2. Are you using a global IT system for managing shipments? With supply chains becoming more complex and dynamic, sourcing locations being changed increasingly quickly and purchase orders becoming smaller and more frequent, the growing complexity of supply chains requires dynamic and advanced Information Technology solutions. They need to offer instant global visibility of the entire supply chain and allow for demand-driven planning & response to changes in trade, capacity and demand if needed across multiple companies that are handling the products. This article titled Supply chain software technology works, but does it do the work? addresses in more detail why the question where is my stuff? is considered a critical supply chain industry question. Or check out our recent blog post on Control Towers for more information on how these centralized hubs can improve supply chain decision making. Where is my stuff? is considered a critical supply chain industry question 3. How do you support - and assure - a socially responsible supply chain? Society in general increasingly asks for products that are sourced in a responsible way, with minimum negative social, economic and environmental impact on society. In a previous post we mentioned that Sustainable Logistics is more than just getting the numbers right. It will become the standard for every step of the supply chain including transparency about how this behaviour is monitored and realized. Furthermore, with global supply chains crossing a wide range of countries - all with different country legislations - legal compliance to e.g. anti-bribery and corruption legislation is having an increasing impact on supply chains. 3PLs need to be able to cope with this on a global scale. 7

8 4. To what extent do you support multi-channel and dynamic sourcing? Future-proof supply chains need to support sourcing via multiple channels, from brick & mortar to e-commerce, on multiple locations with multiple transport modes at different times. To be able to do so, a highly flexible supply chain that easily adapts to last-minute changes is needed to secure speed-to-market and reduce the impact of unexpected hick-ups. This recorded webinar on how to turn your supply chain from static to dynamic dives deeper into the topic. Typical elements of dynamic and automated logistics planning 5. How do you realize continuous supply chain optimization? As argued, the logistics world will likely change in unexpected ways. In their report The shifting economics of global manufacturing the Boston Consulting Group indicated that years of steady change in wages, productivity, energy costs, currency values, and other factors are quietly but dramatically redrawing the map of global manufacturing cost competitiveness : Brazil has become one of the highest-cost countries for manufacturing; Mexico is cheaper than China; the UK is the lowest-cost manufacturer in Western Europe, and costs in Russia and Eastern Europa have risen to near parity with the US. So yes indeed, the world is changing. And Charles Darwin already taught us that it is not the strongest or the most intelligent who will survive, but those who can best manage change. The DNA of a 3PL should contain a good dose of change to be able to support their customers in their continuous efforts to optimize their logistics operations. 8

9 What s your global spread - and notably your presence in developing countries? Are you using a global IT system for managing shipments? How do you support - and assure - a socially responsible supply chain? To what extent do you support multi-channel and dynamic sourcing? How do you realize continuous supply chain optimization? Do the future-proof-check: 5 questions to ask your logistics partner 9

10 04. FURTHER READING With growing complexity and an increasing need for flexibility entering global supply chains, a partnership with the right logistics service provider - who understands your industry, your supply chain and who has the capabilities to act swiftly and globally to new developments and insights - will offer a serious competitive advantage over those who approach their supply chain in more traditional ways. This eguide on what to look for when selecting a 3PL might be of help in your search for the right, fit & flexible 3PL partner. A partnership with the right logistics service provider offers a serious competitive advantage 10

11 About the author Han Nabben is Damco s Global Head of Marketing, based in the Damco headquarters in The Hague, The Netherlands. About Damco Damco is one of the world s leading third party logistics providers specialising in customised freight forwarding and supply chain solutions. The company has 11,000+ employees in more than 300 offices around the world and a global presence in about 100 countries. Damco is part of the Maersk Group. More information about Damco can be found on All rights reserved. No part of this document may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of Damco International BV. 11